‘Get ready’ for ten-fold interest rate increase
By Peter Wozniak
People should begin preparing for a gradual rise in interest rates to “normalised” levels of five per cent, a Bank of England official has said.
The Bank’s monetary policy committee has so far kept the cost of borrowing at the low rate of 0.5% in a bid to stimulate lending.
But Paul Fisher, a member of the MPC, told the Daily Telegraph newspaper that there were plans to “trigger the mindset in people” that rates will eventually be raised back to levels approaching five per cent.
He added: “We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position.”
In an attempt to dampen fears of radical changes happening immediately, Mr Fisher qualified his prediction, telling the paper: “Now the speed at which that happens is another thing entirely. There’s no reason why the pace should be more precipitative.
“We would only [be] tightening quickly if the strength of the economy did demand it.
“So obviously we would not be putting up rates so quickly as to cause that sort of negative reaction. That’s something we can try to anticipate and build in. So we would put rates up, see what the effect is and then judge how quickly to go.”
At the last MPC meeting, it emerged that the committee was split three ways as to whether to alter interest rates.
Concern is also mounting over the level of inflation, which at 3.3% remains well above the Bank of England’s stated target of two per cent.
